Insiders at Broadcom Inc. (NASDAQ:AVGO) sold US$21m worth of stock, possibly indicating weakness in the future
In the last year, many Broadcom Inc. (NASDAQ:AVGO) insiders sold a substantial stake in the company which may have sparked shareholders' attention. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, if numerous insiders are selling, shareholders should investigate more.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
See our latest analysis for Broadcom
The Last 12 Months Of Insider Transactions At Broadcom
In the last twelve months, the biggest single sale by an insider was when the insider, Thomas Krause, sold US$8.1m worth of shares at a price of US$586 per share. That means that an insider was selling shares at slightly below the current price (US$603). We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was 100% of Thomas Krause's holding.
Over the last year we saw more insider selling of Broadcom shares, than buying. The chart below shows insider transactions (by companies and individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Broadcom better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Broadcom Insiders Are Selling The Stock
The last three months saw significant insider selling at Broadcom. Specifically, insiders ditched US$886k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
Insider Ownership Of Broadcom
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that Broadcom insiders own 1.5% of the company, worth about US$3.7b. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Broadcom Insider Transactions Indicate?
Insiders sold stock recently, but they haven't been buying. And our longer term analysis of insider transactions didn't bring confidence, either. But since Broadcom is profitable and growing, we're not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. You'd be interested to know, that we found 2 warning signs for Broadcom and we suggest you have a look.
Of course Broadcom may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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